[Editor's note: 1031Gateway supports the efforts of groups like www.SaveThe1031.org, which is exposing the devastation this tax reform proposal would unleash on our economy and mobilizing Americans to make their opposition known to Congress in order to stop this bill. Please visit www.SaveThe1031.org and fill out their form to directly send individual letters to your representative and senators in Congress, urging them to fight for the 1031 exchange.]
"There is no doubt that the U.S. needs tax reform and that lowering taxes on both corporations and individuals would benefit the economy, but how exactly would that be funded?
"...there always seems to be one specific tax code that is a sticking point: the 1031 exchange. Ironically, the 1031 exchange is the one tax code that, if abolished, could most harm the American middle class..."
Eliminating like-kind exchanges "would reduce liquidity in many commercial real estate markets, especially in states such as California and Washington, where the volume of deals under the 1031 exchange has been particularly large...
"The imposition of a higher capital gains tax burden on small businesses and individuals while the Federal Reserve is in the process of raising interest rates [Editor's note: The current GOP House Blueprint for tax reform also eliminates business interest deductions.] would tighten liquidity for small businesses even further...
"Examining the 10-year average of capital gains as a percentage of gross domestic product (green dotted line), it is crystal clear. High capital gain taxes simply bring less tax income as investments go down, and when investments go down businesses shrink, jobs are lost and real estate prices take a hit.
"The commercial real estate sector that has benefited greatly from the 1031 exchange could take a hard hit, especially if the economy takes a downturn."